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CBOE Update on Benchmark Indexes and Volume
January 14, 2010--CBOE Benchmark Indexes in 2009
Here are the percentage changes for CBOE benchmark indexes in 2009
47.3%-VPD - CBOE VIX Premium Strategy Index-www.cboe.com/VPD
45.6% -BXN - CBOE Nasdaq BuyWrite Index - www.cboe.com/BXN
32.2%-BXY - CBOE S&P 500 2% OTM BuyWrite- www.cboe.com/BXY
31.5%-PUT - CBOE S&P 500 PutWrite Index-www.cboe.com/PUT
29.1% -BXR - CBOE Russell 2000 BuyWrite Index -www.cboe.com/BXR
25.9%-BXM - CBOE S&P 500 BuyWrite Index-www.cboe.com/BXM
23.3% -BXD - CBOE DJIA BuyWrite Index -www.cboe.com/BXD
17.6% - CLL - CBOE S&P 500 95-110 Collar Index-www.cboe.com/CLL
(The S&P 500 Index total return was up 26.5% in 2009.)
High Gross Premiums for BXM Index. The CBOE S&P 500 BuyWrite Index (BXM) received gross premiums averaging around 2.8 percent per month in 2009, and the BXM Index was up 25.9% in 2009. www.cboe.com/BXM
Visit www.cboe.com/benchmarks
Schwab Introduces Two New Low-Cost ETFs Focused on Emerging Markets and International Small-Cap Equities
New ETFs Have No Online Trading Commissions for Schwab Clients
January 14, 2010--Charles Schwab Investment Management, Inc. (CSIM) has launched its seventh and eighth exchange-traded funds with low operating expense ratios and commission-free online trading in Schwab accounts. The latest two are the Schwab Emerging Markets Equity ETF (SCHE) and the Schwab International Small-Cap Equity ETF (SCHC) and they begin trading on Jan. 14th, 2010.
The first four Schwab ETFs — U.S. Broad Market (SCHB), U.S. Large-Cap (SCHX), U.S. Small-Cap (SCHA) and International Equity (SCHF) were launched Nov. 3. In addition, the Schwab U.S. Large-Cap Growth ETF (SCHG) and the Schwab U.S. Large-Cap Value ETF (SCHV) were launched on Dec. 11.
As of Jan. 12, CSIM had $419 million in assets under management in the first six Schwab ETFs, and trading volume has increased steadily across the six ETFs since inception.
“Individual investors and investment advisors count on Schwab for products that provide exceptional value, and our clients have indicated an interest in ETFs as a way to invest in and trade entire segments of the market,” said Peter Crawford, senior vice president at Charles Schwab & Co., Inc. “These two new ETFs allow investors to access emerging markets equities and international small-cap equities. And commission-free online trades make the Schwab ETFs an even more cost-effective investment.”
The new Schwab ETFs have some of the lowest expense ratios in the market for funds with similar objectives — the two new funds each have an expense ratio of 0.35 percent. Like the first six funds, the two new Schwab-managed ETFs can be bought and sold commission-free online in Schwab accounts.
"We are extremely pleased with the successful launches of our new suite of Schwab ETFs,” Crawford said. “The compelling value proposition combined with the steady trading volumes since inception and relatively tight bid/ask spreads have resulted in strong adoption by both retail investors and independent investment advisors. We are committed to supporting and growing these new products and relationships."
Commission-free online trading of Schwab ETFs is available to individual investors at Schwab, to the more than 6,000 independent investment advisors who use Schwab’s custodial services and through Schwab retirement accounts that permit trading of ETFs.
Elimination of 12b-1 Plan
The Board of Trustees of the Schwab ETF Trust approved the termination of the Distribution and Shareholder Services (12b-1) Plan for all proprietary ETFs. This change was filed with the SEC on January 13, 2009.
“We've eliminated our Rule 12b-1 plan to simplify our pricing and remove the potential additional costs,” said Crawford. “This change reaffirms our commitment to providing clients with optimal value in our relationship with them.”
China Materials ETF (CHIM) added to family of China sector ETFs
January 14, 2010--New York-based asset manager Global X Management Company today launched the Global X China Materials ETF (NYSE Arca: CHIM), the first ETF offering targeted access to the China Materials sector. CHIM is the latest addition to the comprehensive family of China sector ETFs offered by Global X Funds.
The Global X China Materials ETF seeks to replicate the S-BOX China Materials Index, which is designed to reflect the performance of the materials sector in China. As of December 30, 2009, the Metals & Mining sector represents 66% of the index and Chemicals 34%. The largest index components were Aluminum Corporation of China, Angang Steel, Fufeng Group and Shougang Concord International.
China is the world’s largest consumer of copper, zinc, tin, aluminum, lead, platinum, steel, iron ore, fertilizer and many other materials. China is also the world’s top producer of steel, aluminum, zinc, tin, fertilizer and other materials, including 95% of the world’s rare earths, used in a variety of applications, especially in the high technology area.
“China is a large producer and the world’s largest consumer of materials, and its hunger for resources will continue to grow as it builds more cars, railroads and high rises,” said Bruno del Ama, CEO of Global X Management. “China’s GDP is expected to expand 9.4% in 2010, after growing 8.5% in 2009, according to the median estimate of economists surveyed by Bloomberg. The country’s economic upswing will help drive demand for materials in 2010 and beyond.”
The China Materials ETF is the latest launch in the family of China sector ETFs offered by Global X Funds, joining the China Consumer ETF (CHIQ), China Energy ETF (CHIE), China Financials ETF (CHIX), China Industrials ETF (CHII), and China Technology ETF (CHIB), all trading on the NYSE Arca. All funds have a 0.65% expense ratio.
Deposits regulator points finger at Fed
January 14, 2010--The US regulator that insures depositors against bank failures laid much of the blame for the financial crisis at the door of the Federal Reserve on Thursday.
Sheila Bair, chairman of the Federal Deposit Insurance Corporation, told an inquiry that “much of the crisis may have been prevented” if the Fed had not waited seven years to put in tough rules to regulate subprime mortgage lending.
The typically forthright written testimony from Ms Bair to the second day of hearings held by the Financial Crisis Inquiry Commission pits one of the most politically powerful regulators against one of the weakest. The Fed is under attack on multiple fronts in Congress with attempts to conduct sweeping audits of the central bank and remove much of its regulatory role.
Morningstar Reports U.S. Mutual Fund and ETF Asset Flows Through December 2009
January 14, 2010--Morningstar, Inc. (Nasdaq: MORN), a leading provider of independent investment research, today reported estimated U.S. mutual fund and exchange-traded fund asset flows through December 2009. Net inflows for mutual funds amounted to $377.4 billion in 2009, with $356.6 billion of that total going to bond funds. The U.S. ETF industry closed out 2009 with $784.9 billion in assets under management, up from $744.7 billion at the end of November, and $533.4 billion at the end of 2008.
Additional highlights from the report on mutual funds:
As bond funds raked in the cash, U.S. stock funds bled assets in 2009. They saw an additional $8.1 billion in outflows in December, taking the full-year total outflow to $25.7 billion.
Although international-stock funds fared better than domestic-stock funds in 2009, taking in $25.5 billion in flows, they have not come close to making up for the $70.4 billion in outflows they experienced in 2008.
In spite of the broad trend toward inflows, a handful of fund families didn't join the party. American Funds, Legg Mason/Western Asset, Putnam, Oppenheimer, Van Kampen, and Morgan Stanley were among the fund families that experienced net outflows in 2009.
Investors largely preferred active strategies in 2009. Active funds gathered $304.2 billion in assets for the year, while passive long-term funds took in $69.7 billion. However, investors pulled $52.9 billion out of active U.S. stock funds, while passive domestic-equity funds saw inflows of $26.2 billion.
Additional highlights from the report on ETFs:
Despite being the only broad asset class to show net outflows in 2009, U.S. stock ETFs closed out the year with $19.6 billion in net inflows in December. Taxable-bond ETFs were the most popular asset class of 2009, bolstered by continued interest in Treasury Inflation-Protected Securities and short-duration ETFs, which were once again the category's top asset gatherers in December.
Following their explosive performance over the past year, investors continued to pile into emerging markets in December.
SPDR Gold Shares, which saw $11.2 billion in total net inflows in 2009 and currently has more than $40.2 billion in assets under management, was easily the most popular ETF in 2009 in terms of total asset flows.
To view the complete report, please visit http://www.global.morningstar.com/decflows09.
Statement of Dan M. Berkovitz, General Counsel, Background on Position Limits and the Hedge Exemption
January 14, 2010--This statement provides a brief history of the federal legislation authorizing and directing the Commodity Futures Trading Commission (“CFTC” or “Commission”) to impose position limits in CFTC-regulated futures markets and of the CFTC’s regulatory program to implement this authority. This paper also describes the legislative and regulatory provisions that exempt bona fide hedgers from these position limits.
Since 1936, the Commodity Exchange Act (CEA) has directed the CFTC to establish such limits on trading as it finds “are necessary to diminish, eliminate, or prevent” the undue burdens on interstate commerce that result from excessive speculation in those commodities. Presently, position limits are imposed in several ways. The CFTC fixes the position limits for certain agricultural commodities, and specifies acceptable practices for the exchanges to follow when establishing limits for other commodities. The CEA also allows the exchanges to use “position accountability levels” in months other than the spot month for commodities, “where necessary and appropriate.”
The CEA has always exempted “bona fide hedging transactions” from position limits. Initially, the Act defined the term “bona fide hedging” as transactions that were offsetting price risks in the cash market for a commodity. In 1974, Congress provided the Commission with discretion to define the term, provided that the definition enables producers and users of a commodity to hedge their anticipated business needs.
Open Meeting on Proposed Energy Speculative Position Limits Rule
January 14, 2010--Presentation of Steve Sherrod's, Acting Director, Division Market Surveillance on Proposal to Set Position Limits in the Energy Futures and Options Markets.
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Fact Sheet: Financial Crisis Responsibility Fee
January 14, 2010--Today, the President announced his intention to propose a Financial Crisis Responsibility Fee that would require the largest and most highly levered Wall Street firms to pay back taxpayers for the extraordinary assistance provided so that the TARP program does not add to the deficit. The fee the President is proposing would:
Require the Financial Sector to Pay Back For the Extraordinary Benefits Received:
Many of the largest financial firms contributed to the financial crisis through the risks they took, and all of the largest firms benefitted enormously from the extraordinary actions taken to stabilize the financial system. It is our responsibility to ensure that the taxpayer dollars that supported these actions are reimbursed by the financial sector so that the deficit is not increased.
Responsibility Fee Would Remain in Place for 10 Years or Longer if Necessary to Fully Pay Back TARP:
The fee – which would go into effect on June 30, 2010 – would last at least 10 years. If the costs have not been recouped after 10 years, the fee would remain in place until they are paid back in full. In addition, the Treasury Department would be asked to report after five years on the effectiveness of the fee as well as its progress in repaying projected TARP losses.
Raise Up to $117 Billion to Repay Projected Cost of TARP:
As a result of prudent management and the stabilization of the financial system, the expected cost of the TARP program has dropped dramatically. While the Administration projected a cost of $341 billion as recently as August, it now estimates, under very conservative assumptions, that the cost will be $117 billion--reflecting the $224 billion reduction in the expected cost to the deficit. The proposed fee is expected to raise $117 billion over about 12 years, and $90 billion over the next 10 years.
President Obama is Fulfilling His Commitment to Provide a Plan for Taxpayer Repayment Three Years Earlier Than Required:
The EESA statute that created the TARP requires that by 2013 the President put forward a plan "that recoups from the financial industry an amount equal to the shortfall in order to ensure that the Troubled Asset Relief Program does not add to the deficit or national debt." The President has no intention of waiting that long. Instead, the President is fulfilling three years early his commitment to put forward a proposal that would – at a minimum – ensure that taxpayers are fully repaid for the support they provided.
Apply to the Largest and Most Highly Levered Firms:
The fee the President is proposing would be levied on the debts of financial firms with more than $50 billion in consolidated assets, providing a deterrent against excessive leverage for the largest financial firms. By levying a fee on the liabilities of the largest firms – excluding FDIC-assessed deposits and insurance policy reserves, as appropriate – the Financial Crisis Responsibility Fee will place its heaviest burden on the largest firms that have taken on the most debt. Over sixty percent of revenues will most likely be paid by the 10 largest financial institutions.
How the Fee Would Work
While more complete details of the proposed Financial Crisis Responsibility Fee will be released in conjunction with the President's budget, the basic outline of the fee is as follows:
Levied on Only the Largest Financial Firms with the Most Leverage
Applied Only to Firms with More Than $50 Billion in Consolidated Assets: The fee would only be applied to firms with more than $50 billion in consolidated assets. No small or community bank would be covered by the fee.
Fee Would Cover Banks and Thrifts, Insurance and Other Companies That Own Insured Depository Institutions, and Broker-Dealers:
Covered institutions would include firms that were insured depository institutions, bank holding companies, thrift holding companies, insurance or other companies that owned insured depository institutions, or securities broker-dealers as of January 14, 2010, or that become one of these types of firms after January 14, 2010.. These institutions were recipients and/or indirect beneficiaries of aid provided through the TARP, the Temporary Liquidity Guarantee Program, and other programs that provided emergency assistance to limit the impact of the financial crisis.
Two Schwab Equity ETFs List on NYSE Arca
January 14, 2010--NYSE Euronext (NYX) announced that its wholly-owned subsidiary, NYSE Arca, today began trading the Schwab International Small-Cap Equity ETF (Ticker: SCHC) and the Schwab Emerging Markets Equity ETF (Ticker: SCHE). The funds are advised by Charles Schwab Investment Management.
Schwab International Small-Cap Equity ETF
The fund’s goal is to track as closely as possible, before fees and expenses, the total return of the FTSE Developed Small Cap ex-US Liquid Index, which is comprised of small capitalization companies in developed countries outside the United States , as defined by the index provider. The index defines the small capitalization universe as approximately the bottom 10% of the eligible universe with a minimum free float capitalization of $150 million. As of June 30, 2009, the index was composed of 1,820 stocks in 23 developed market countries.
Schwab Emerging Markets Equity ETF
The fund’s goal is to track as closely as possible, before fees and expenses, the total return of the FTSE All-Emerging Index, which is comprised of large and mid capitalization companies in emerging market countries, as defined by the index provider. The index defines the large and mid capitalization universe as approximately the top 90% of the eligible universe. As of June 30, 2009, the index was composed of 824 stocks in 23 emerging market countries.
Global X Funds Lists Global X China Materials ETF on NYSE Arca
January 14, 2010--NYSE Euronext (NYX) announced that its wholly-owned subsidiary, NYSE Arca, today began trading the Global X China Materials ETF (Ticker: CHIM). The ETF is sponsored by Global X Funds.
The fund seeks to provide investment results that correspond generally to the price and yield performance, before fees and expenses, of the S-BOX China Materials Index. The Index is a free float adjusted, liquidity tested and market capitalization-weighted index that is designed to measure performance of the investable universe of companies in the Materials sector of the Chinese economy, as defined by Structured Solutions AG, which generally includes companies whose businesses involve: chemicals; metals and mining; and forestry and paper products.
PowerShares files with the SEC
January 14, 2010--PowerShares has filed a registration statement with the SEC.
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ProShares files with SEC
January 14, 2010-ProShares has filed a registration statement, post-effective amendment with the SEC.
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Investor governance chiefs write to US Senators calling for SEC self-funding
January 13, 2010--A group of senior institutional investment figures, including Mark Anson, the former CalPERS and Hermes chief, now president of Nuveen Investments, and Hye-Won Choi, head of corporate governance at TIAA-CREF, is writing to US senators calling for the Securities and Exchange Commission (SEC) to become self funding to protect investors. They argue that the SEC’s funding has not kept pace with the explosive growth of US securities markets over the past two decades.
The letter will shortly be sent to the Senate’s Committee on Banking, Housing, and Urban Affairs. It is being co-ordinated by the SEC’s Investor as Owner Subcommittee, which was formed in June 2009 in the wake of the financial crisis. Its members are calling for other institutional investors to sign the letter. The letter says: “In order to safeguard investors and US capital markets, the SEC must have stable, independent self-funding that meets its needs.
SEC Issues Concept Release Seeking Comment on Structure of Equity Markets
January 13, 2010--The Securities and Exchange Commission today moved forward with a broad review of the equity market structure, voting unanimously to issue a concept release seeking public comment on such issues as high frequency trading, co-locating trading terminals, and markets that do not publicly display price quotations.
The U.S. equity markets have undergone significant change in recent years from a market structure that relies on people shouting on the exchange floors to one that relies on advanced computer technology. The speed of trading has accelerated from seconds to milliseconds to microseconds. Trading volume has expanded, and new trading centers have entered the markets and captured a significant share of volume. Liquidity is now dispersed among many different venues, and these venues offer a complex array of order types and other trading services.
In conducting this review, the Commission seeks to ensure that the current market structure serves the interests of long-term investors who are willing to accept the risk of equity ownership over time and are essential for capital formation. These investors include individuals who invest directly in equities, as well as retirement plans and other institutional investors that invest on behalf of many individuals.
"At the Commission, we must continually assess how changes in the market are affecting investors," said SEC Chairman Mary L. Schapiro. "We must try to understand how these changes may impact the markets in the future, so we can steer clear of any unnecessary risks to investors."
SEC Proposes New Rule to Effectively Prohibit Unfiltered Access and Maintain Market Access Controls
January 13, 2010--The Securities and Exchange Commission today voted unanimously to propose a new rule that would effectively prohibit broker-dealers from providing customers with "unfiltered" or "naked" access to an exchange or alternative trading system (ATS).
The SEC's proposed rule would require brokers with market access, including those who sponsor customers' access to an exchange, to put in place risk management controls and supervisory procedures. Among other things, the procedures would help prevent erroneous orders, ensure compliance with regulatory requirements, and enforce pre-set credit or capital thresholds.
"Unfiltered access is similar to giving your car keys to a friend who doesn't have a license and letting him drive unaccompanied," said SEC Chairman Mary L. Schapiro. "Today's proposal would require that if a broker-dealer is going to loan his keys, he must not only remain in the car, but he must also see to it that the person driving observes the rules before the car is ever put into drive."
Broker-dealers use a 'special pass' known as their market participant identifier (MPID) to electronically access an exchange or ATS and place an order for a customer. Broker-dealers are subject to the federal securities laws as well as the rules of the self-regulatory organizations that regulate their operation.
